Question

1. On Dec 31, 2019, the shares of Alphabet, IBM, and Apple closed at $1,040, $134, and $294 respectively. The closing price of the three stocks on Jan 16, 2020 was $1,450, $138, and $315, respectively. None of the three companies paid dividends during this period. The market values of the three companies at the end of 2019 were $717, $118, and $1,288 billion dollars.  Calculate the return of a value-weighted index consisting of these three stocks during this period.

Answer 1

Computing the No. of Share outstanding of three stocks

	Particular	Alphabet	IBM	Apple
a	Market Value on 31-dec-2019	$ 717 billion	$ 118 billion	$ 1288 billion
b	Share price on 31-dec-2019	$1040	$134	$294
c	No. of Shares Outstanding [(a)/(b)]	689.4231 million	880.5970 million	4.3810 billion

Calculating the return of a value-weighted index consisting of three stocks:

Company	Shares Outstanding(a)	Price on 31-Dec(b)	Market Value [(a)*(b)]	Price on 16-Jan (c)	Market Value[(a)*(c)]
Alphabet	689.4231 million	1040	717 Billion	1450	999.66 billion
IBM	880.5970 million	134	118 billion	138	121.52 billion
Apple	4.3810 billion	294	1288 billion	315	1380 billion
Total Market Value of three stocks on respective date			2123 billion		2501.18 billion

The return of a value-weighted index consisting of these three stocks during this period :

= [(Market value on 16-Jan)-(Market value on 31-Dec)/(Market value on 31-Dec)]*100

= 17.81%

Note- If you need any clarification regarding this solution, then you can ask in comments

If you like my answer then please Up-vote as it will be motivating.